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Rotich’s Budgetary Hits and Misses

Rotich’s Budgetary Hits and Misses



 

 

 

 

 

 

 

BY SIMON MULI 

Treasury Cabinet Secretary Henry Rotich performed his fiduciary responsibility as the custodian of the national finances by tabling the national budgetary estimates to the floor of a house in the usual pomp and flair that accompanies the annual activity. As expected, the budgetary allocations mirrored official government talk, aligning it with President Uhuru Kenyatta’s Big 4 Agenda, cutting low-priority expenditure and clearing regulatory hurdles that may be standing in the way.

By now you probably have the whole budget speech transcribed, printed, read and re-read, so I won’t belabour you with the details. But as is usually the case with government decisions, the pronouncements made in the budget are set to have far reaching ramifications on the economy, the business environment and taxpayers in general. Which is why it’s important to shine a spotlight on the good, the bad and the ugly of this year’s budget:

Hits

1. Interest rates

The government’s own soul searching revealed that the interest rate caps regime it has presided over for the last three years is not working. And it admitted quite as much. Repealing section 33B of Banking Act is set to unlock credit to the private sector that has pretty much paid the high price of the controversial law. However, the government appears to be planning to do this with caution to prevent a return of high cost of borrowing that brought about the law in the first place.

2. Business Environment

The government is implementing a raft of measures to create a conducive environment for businesses to thrive. One of them was the reduction of VAT withholding from 6% to 2%. From a cash flow perspective, this is good for business. The directive to ministries and government agencies to only procure vehicles exclusively from companies that are locally assembling was also a good thing. If these measures are successfully implemented, the dream to move the country up to the top 50 countries in the world in terms of ease of doing business is likely to be achieved.

3. Betting

Despite it being attractive to investors, gambling has proven to have a negative social impact on the country’s youth. Kenya is a young economy with a median age of 18 years. We can’t afford to have them preoccupied with gambling activities if we are to achieve our economic targets. Increasing excise duty on betting activity to disincentive them is arguably a smart move.

4. Environment

The ban on single-use plastic products such as disposable plates, cups, straws, and water bottles at our forests and beaches was a step in the right direction. And it comes as no surprise given that the country already has in place the world’s toughest ban on plastic bags.  Getting tough on plastic use could also save this economy billions by preventing the negative health effects associated with pollution. The less diseases affect the population, the less the government spends on healthcare budgets.

Misses

1. Fiscal deficit

The sheer size of the budget is alluring; it has been since the Jubilee administration came to power. But funding it has been a pain in the neck thanks to the unmet revenue collection targets by KRA. At just above 600 billion, the fiscal deficit, though lower than last year’s, is still high. And borrowing, whether domestically or through foreign financing has its own hassles. Fiscal discipline will continue to be one of the most difficult lessons CS Rotich and his like-minded government bureaucrats will have to learn.

2. Corruption

We will talk about how much corruption money has been recovered compared to the amount of money that has been pumped towards fighting it thus far and see whether there has been a return on investment (RoI). But that will be in a different forum. For now, the government is not doing a good job mitigating pilferage of public coffers. Runaway corruption continues to be the single most threat to President Kenyatta’s legacy. Even the Big 4 agenda will be a herculean task if he doesn’t slay the dragon, and fast.

3. Agriculture

Food security forms a big part of the President’s Big 4 agenda. Agriculture is the mainstay of our economy and the biggest employer.  But the budgetary allocation to the sector was less than satisfactory. Besides, Kenya is a signatory to the Maputo Declaration which prescribes that 10% of the budget should be allocated to agriculture. In our case this should have been Kshs 300 billion not Kshs 55 billion.

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